SMEs carry the burden of the nation’s prosperity on their shoulders, they are coined as our economic solution but the support they need – from access to skills, international venture capital, basic administrative needs etc., - is not enough. Picture: David Ritchie, Independent Newspapers.
By the StartUp Act Steering Committee
For all intents and purposes enabling SMEs to grow – thus creating jobs, positively affecting GDP, increasing the tax base and attracting FDI – is not only needed but is a necessity.
We also know that SMEs operate within an outdated bureaucratic system that hinders instead of helps and many, from mom-and-pop shops to high-growth tech entrepreneurs are restricted from expanding their businesses locally and abroad due to onerous red tape.
This is not new. We have experienced systemic policy roadblocks for decades and all involved – from government to the Department of Small Business, Seda, our StartUp Act efforts and the private sector, to name but a few – have been working tirelessly to stimulate the SME sector and enable the economy to grow by undoing what was legislatively put in place years ago.
The point of difference is this. South Africa’s economic growth rate in 2024 is projected to be just 1,3%.
While this is an increase from 2023’s 0,4% is it still dangerously low[1], and large-scale job creation – which we desperately need - will remain beyond our grasp.
SMEs are often said to be our saviours.
It’s why, in 2014, the then newly appointed small business development minister Lindiwe Zulu confidently said that her department will help power the National Development Plan’s goal whereby 90% of all jobs will be created by small to medium sized businesses by 2030. At that time, she said that this would be made possible by reducing red tape and regulatory complexity.
That was almost a decade ago.
It's not that there isn’t a will, rather a lack of a way.
There is no one in South Africa who does not want the country, and its people, to succeed. We are a country of greatness, resilience, stamina and grit. We persevere despite the obstacles.
But even with this shared innate spirit, the South African soul, we find ourselves moving at a snail’s pace to meet Zulu’s vision.
SMEs carry the burden of the nation’s prosperity on their shoulders, they are coined as our economic solution but the support they need – from access to skills, international venture capital, basic administrative needs etc., - is not enough.
We know that to kickstart our SME community, we need the government to derisk and absorb the cost of the first loss. While this has been undertaken in some part by the SA SME Fund, we need more.
The National Treasury however simply does not have the financial resources to go around.
The Medium-Term Budget on 1st November reminded us of that fact.
Without a doubt, Finance Minister Enoch Godongwana was placed between a rock and a hard place and walked a tightrope that day: SOEs including Eskom and Transnet need billions, we have R4,3-trillion in public debt, ballooning public sector wages and weak growth.
While it’s a hard pill to swallow, this ugly truth should not deter us.
While the government is doing what it can to support the SME sector financially, its ability to radically reduce red tape is possible and is what we as the StartUp Act Steering Committee are championing alongside our peers at the Department of Small Business and others.
To this end, we salute efforts such as the Red Tape Reduction Unit that serves to solve problems and remove red tape barriers preventing businesses from growing, sustaining revenue and jobs.
A case in point is its success between May 2019 and September 2022: it saved the Western Cape economy a staggering R1,85-billion.
On this achievement made earlier this year, the Minister of Finance and Economic Opportunities, Mireille Wenger, was reported to have said: “Cutting red tape is a key priority because businesses, especially our small businesses, that are so important to growing our economy and creating jobs, should be able to focus on their operations and expansion, rather than being bogged down with government red tape and bureaucracy.”
Hear, hear.
Red tape is not the only wolf at the SME sector’s door, however.
Our entrepreneurial ecosystem is, or more correctly, the lack thereof.
As a nation we do not have a history of entrepreneurship like countries in Asia or others across the continent do.
We have instead relied on commodities as our core commercial sector for too long. Given it is experiencing a down cycle, developing entrepreneurial minds and structuring skills sets need to be enabled from a young age and is why it is so important to have programmes at high school and TVET levels that cultivate this mindset.
Young entrepreneurs create jobs for other youths. Given 39,9% of all youths are unemployed this is a must [2]. Despite this opportunity, the OECD (Organisation for Economic Cooperation and Development), which represents 38 countries including South Africa, reported last year (2022) that in our country, 45% of youth aspire to be entrepreneurs, but only 8% actually are [3].
This starkly points to the need to support young start-ups with skills development and of course, access to finance with a view to produce job creators and not job seekers.
We have a long way to go to meet our 2030 goal of having 90% of all jobs being created by SMEs.
Skills development, access to finance, incubation opportunities and policy reform, as a start, need attention from those that can give it. It’s a slow process, but we are getting there step by step.
Fortunately, interest in our local startup communities exists and partners like the UK-South Africa Tech Hub, an initiative of the UK government, supports our vision and needs.
For instance, we have been working with this organisation to help address, or ultimately abolish, legal issues with a view to put SA high-growth entrepreneurs on the international agenda.
With the annual Global Entrepreneurship Week taking place between the 13th – 19th November, we, together with partner GEC+Africa are hosting a policy breakfast that will focus on the mission to strengthen our current policies and legislation, how South African Startup Ecosystems can participate in policy dialogues and collaborate with the government on policy challenges.
We will also demonstrate how our country’s activities will assist in showing SA as a mean to serve as a platform to showcase regional entrepreneurship ecosystems and to identify regional talent to pitch at GEC+ Africa.
BUSINESS REPORT